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model based testing for embedded systems
Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012 38th Edition O. Ray Whittington, Patrick R. Delaney - Solutions
The following information is available for Ann Drury for 2010:Salary $36,000 Premiums paid by employer on group-term life insurance in excess of $50,000 500 Proceeds from state lottery 5,000 How much should Drury report as gross income on her 2010 tax return?a. $36,000b. $36,500c. $41,000d. $41,500
Income in respect of a cash-basis decedenta. Covers income earned and collected after a decedent’s death.b. Receives a stepped-up basis in the decedent’s estate.c. Includes a bonus earned before the taxpayer’s death but not collected until after death.d. Must be included in the decedent’s
Ed and Ann Ross were divorced in January 2010. In accordance with the divorce decree, Ed transferred the title in their home to Ann in 2010. The home, which had a fair market value of $150,000, was subject to a $50,000 mortgage that had twenty more years to run. Monthly mortgage payments amount to
In 2005, Ross was granted an incentive stock option(ISO) by her employer as part of an executive compensation package. Ross exercised the ISO in 2008 and sold the stock in 2010 at a gain. Ross was subject to regular tax for the year in which thea. ISO was granted.b. ISO was exercised.c. Stock was
Lee, an attorney, uses the cash receipts and disbursements method of reporting. In 2010, a client gave Lee 500 shares of a listed corporation’s stock in full satisfaction of a$10,000 legal fee the client owed to Lee. This stock had a fair market value of $8,000 on the date it was given to Lee.The
Hall, a divorced person and custodian of her twelveyear-old child, submitted the following information to the CPA who prepared her 2010 return:The divorce agreement, executed in 2007, provides for Hall to receive $3,000 per month, of which $600 is designated as child support. After the child
Clark filed Form 1040EZ for the 2010 taxable year. In July 2011, Clark received a state income tax refund of $900, plus interest of $10, for overpayment of 2010 state income tax. What amount of the state tax refund and interest is taxable in Clark’s 2011 federal income tax return?a. $0b. $ 10c.
John and Mary were divorced in 2009. The divorce decree provides that John pay alimony of $10,000 per year, to be reduced by 20% on their child’s 18th birthday. During 2010, John paid $7,000 directly to Mary and $3,000 to Spring College for Mary’s tuition. What amount of these payments should
Perle, a dentist, billed Wood $600 for dental services.Wood paid Perle $200 cash and built a bookcase for Perle’s office in full settlement of the bill. Wood sells comparable bookcases for $350. What amount should Perle include in taxable income as a result of this transaction?a. $0b. $200c.
With regard to the inclusion of social security benefits in gross income for the 2010 tax year, which of the following statements is correct?a. The social security benefits in excess of modified adjusted gross income are included in gross income.b. The social security benefits in excess of one half
Darr, an employee of Sorce C corporation, is not a shareholder. Which of the following would be included in a taxpayer’s gross income?a. Employer-provided medical insurance coverage under a health plan.b. A $10,000 gift from the taxpayer’s grandparents.c. The fair market value of land that the
Which of the following conditions must be present in a post-1984 divorce agreement for a payment to qualify as deductible alimony?I. Payments must be in cash.II. The payment must end at the recipient’s deatha. I only.b. II only.c. Both I and II.d. Neither I nor II.
Bob and Sue Stewart were divorced in 2008. Under the terms of their divorce decree, Bob paid alimony to Sue at the rate of $50,000 in 2008, $20,000 in 2009, and nothing in 2010. What amount of alimony recapture must be included in Bob’s gross income for 2010?a. $0b. $23,283c. $30,000d. $32,500
In July 1995, Dan Farley leased a building to Robert Shelter for a period of fifteen years at a monthly rental of$1,000 with no option to renew. At that time the building had a remaining estimated useful life of twenty years.Prior to taking possession of the building, Shelter made improvements at a
Majors, a candidate for a graduate degree, received the following scholarship awards from the university in 2010:• $10,000 for tuition, fees, books, and supplies required for courses.• $2,000 stipend for research services required by the scholarship.What amount of the scholarship awards should
Which payment(s) is(are) included in a recipient’s gross income?I. Payment to a graduate assistant for a part-time teaching assignment at a university. Teaching is not a requirement toward obtaining the degree.II. A grant to a Ph.D. candidate for his participation in a university-sponsored
For the year ended December 31, 2010, Don Raff earned $1,000 interest at Ridge Savings Bank on a certificate of deposit scheduled to mature in 2011. In January 2011, before filing his 2010 income tax return, Raff incurred a forfeiture penalty of $500 for premature withdrawal of the funds. Raff
In 2010 Uriah Stone received the following interest payments:• Interest of $400 on refund of federal income tax for 2008.• Interest of $300 on award for personal injuries sustained in an automobile accident during 2007.• Interest of $1,500 on municipal bonds.• Interest of $1,000 on United
Daniel Kelly received interest income from the following sources in 2010:New York Port Authority bonds $1,000 Puerto Rico Commonwealth bonds 1,800 What portion of such interest is tax exempt?a. $0b. $1,000c. $1,800d. $2,800
Clark bought Series EE US Savings Bonds in 2010.Redemption proceeds will be used for payment of college tuition for Clark’s dependent child. One of the conditions that must be met for tax exemption of accumulated interest on these bonds is that thea. Purchaser of the bonds must be the sole owner
Charles and Marcia are married cash-basis taxpayers.In 2010, they had interest income as follows:• $500 interest on federal income tax refund.• $600 interest on state income tax refund.• $800 interest on federal government obligations.• $1,000 interest on state government obligations.What
During 2010 Kay received interest income as follows:On US Treasury certificates $4,000 On refund of 2008 federal income tax 500 The total amount of interest subject to tax in Kay’s 2010 tax return isa. $4,500b. $4,000c. $ 500d. $0
In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of qualified US Series EE Bonds may be excluded from gross income.The exclusion is subject to a modified gross income limitation and a limit of aggregate bond proceeds in excess of qualified higher
Micro Corp., a calendar-year accrual-basis corporation, purchased a five-year, 8%, $100,000 taxable corporate bond for $108,530 on July 1, 2010, the date the bond was issued.The bond paid interest semiannually. Micro elected to amortize the bond premium. For Micro’s 2010 tax return, the bond
During 2009, Karen purchased 100 shares of preferred stock of Boling Corp. for $5,500. During 2011, Karen received a stock dividend of ten additional shares of Boling Corp. preferred stock. On the date the preferred stock was distributed, it had a fair market value of $60 per share. What is
Jack and Joan Mitchell, married taxpayers and residents of a separate property state, elect to file a joint return for 2010 during which they received the following dividends:Received by Jack Joan Alert Corporation (a qualified, domestic corporation) $400 $ 50 Canadian Mines, Inc. (a Canadian
Amy Finch had the following cash receipts during 2010:Dividend from a mutual insurance company on a life insurance policy $500 Dividend on listed corporation stock;payment date by corporation was 12/30/09, but Amy received the dividend in the mail on 1/2/10 875 Total dividends received to date on
In 2011, Gail Judd received the following dividends from Benefit Life Insurance Co., on Gail’s life insurance policy (Total dividends received have not yet exceeded accumulated premiums paid) $100 Safe National Bank, on bank’s common stock 300 Roe Mfg. Corp., a Delaware corporation, on
On February 1, 2011, Hall learned that he was bequeathed 500 shares of common stock under his father’s will. Hall’s father had paid $2,500 for the stock in 2006.Fair market value of the stock on February 1, 2011, the date of his father’s death, was $4,000 and had increased to$5,500 six months
James Martin received the following compensation and fringe benefits from his employer during 2010:Salary $50,000 Year-end bonus 10,000 Medical insurance premiums paid by employer 1,000 Reimbursement of qualified moving expenses 5,000 What amount of the preceding payments should be included in
During the current year Hal Leff sustained a serious injury in the course of his employment. As a result of this injury, Hal received the following payments during the year:Workers’ compensation $2,400 Reimbursement from his employer’s accident and health plan for medical expenses paid by Hal
John Budd files a joint return with his wife. Budd’s employer pays 100% of the cost of all employees’ groupterm life insurance under a qualified plan. Under this plan, the maximum amount of tax-free coverage that may be provided for Budd by his employer isa. $100,000b. $ 50,000c. $ 10,000d. $
Howard O’Brien, an employee of Ogden Corporation, died on June 30, 2010. During July, Ogden made employee death payments (which do not represent the proceeds of life insurance) of $10,000 to his widow, and $10,000 to his fifteen-year-old son. What amounts should be included in gross income by the
David Autrey was covered by an $80,000 group-term life insurance policy of which his wife was the beneficiary.Autrey’s employer paid the entire cost of the policy, for which the uniform annual premium was $8 per $1,000 of coverage. Autrey died during 2011, and his wife was paid the $80,000
Under a “cafeteria plan” maintained by an employer,a. Participation must be restricted to employees, and their spouses and minor children.b. At least three years of service are required before an employee can participate in the plan.c. Participants may select their own menu of benefits.d.
Seymour Thomas named his wife, Penelope, the beneficiary of a $100,000 (face amount) insurance policy on his life. The policy provided that upon his death, the proceeds would be paid to Penelope with interest over her present life expectancy, which was calculated at twenty-five years.Seymour died
Fuller was the owner and beneficiary of a $200,000 life insurance policy on a parent. Fuller sold the policy to Decker, for $25,000. Decker paid a total of $40,000 in premiums.Upon the death of the parent, what amount must Decker include in gross income?a. $0b. $135,000c. $160,000d. $200,000
Richard Brown, who retired on May 31, 2010, receives a monthly pension benefit of $700 payable for life. His life expectancy at the date of retirement is ten years. The first pension check was received on June 15, 2010. During his years of employment, Brown contributed $12,000 to the cost of his
Diane Trucco recently wrote a novel which is an excellent work of art. She wishes to copyright and publish this novel. Which of the following is correct?a. Her copyright is valid for her life plus seventy years.b. She must register her copyright to receive protection under the law.c. She is
Which of the following statements is not true of the law of trademarks in the United States?a. Trademark law may protect distinctive shapes as well as distinctive packaging.b. Trademark protection can be lost if the trademark becomes so popular that its use becomes commonplace.c. Trademarks to
Intellectual property rights included in software may be protected under which of the following?a. Patent law.b. Copyright law.c. Both of the above.d. None of the above.
Professor Bell runs off fifteen copies to distribute to his accounting class using his computer from a database in some software he had purchased for his personal research. The creator of this software is claiming a copyright. Which of the following is correct?a. This is an infringement of a
Which of the following statements is correct?a. Patent law is largely based on state law.b. Accessing a digital work is protected by the fair use doctrine.c. Financial and business models used over the internet can be patented.d. All of the above statements are incorrect.
Which of the following is not correct concerning computer software purchased by Gultch Company from Softtouch Company? Softtouch originally created this software.a. Gultch can make backup copies in case of machine failure.b. Softtouch can typically copyright its software for at least seventy-five
Multicomp Company wishes to protect software it has developed. It is concerned about others copying this software and taking away some of its profits. Which of the following is true concerning the current state of the law?a. Computer software is generally copyrightable.b. To receive protection, the
Rand discarded an old rocking chair. Stone found the rocking chair and, realizing that it was valuable, took it home. Later, Rand learned that Stone had the rocking chair and wanted it back. Rand subsequently put a provision in his will that his married daughter Walters will get the rocking chair.
Getty owned some personal property which was later found by Morris. Both Getty and Morris are claiming title to this personal property. In which of the following cases will Getty win over Morris?I. Getty had mislaid the property and had forgotten to take it with him.II. Getty had lost the property
Which of the following factors help determine whether an item of personal property is a fixture?I. Degree of the item’s attachment to the property.II. Intent of the person who had the item installed.a. I only.b. II only.c. Both I and II.d. Neither I nor II.
What is an example of property that can be considered either personal property or real property?a. Air rights.b. Mineral rights.c. Harvested crops.d. Growing crops.
Which of the following items is tangible personal property?a. Share of stock.b. Trademark.c. Promissory note.d. Oil painting.
Robinson’s pricing policies have come under attack by several of its retailers. In fact, one of those retailers, Patman, has instigated legal action against Robinson alleging that Robinson charges other favored retailers prices for its products which are lower than those charged to it. Patman’s
Loop Corp. has made a major breakthrough in the development of a micropencil. Loop has patented the product and is seeking to maximize the profit potential. In this effort, Loop can legallya. Require its retailers to sell only Loop’s products, including the micropencils, and not sell similar
Green, a former owner of Circle Plant, caused hazardous waste pollution at the Circle Plant site two years ago.Sason purchased the plant and caused more hazardous waste pollution. It can be shown that 20% of the problem was caused by Green and that 80% of the problem was caused by Sason. Sason went
Which of the following is(are) possible when a company violates the Clean Air Act?I. The company can be assessed a criminal fine.II. Officers of the company can be imprisoned.III. The Environmental Protection Agency may assess a civil penalty equal to the savings of costs by the company for
Whenever a federal agency recommends actions or legislation that may affect the environment, the agency must prepare an environmental impact statement. Which of the following is not required in the environmental impact statement?a. A description of the source of funds to accomplish the action
The Environmental Protection Agency is an administrative agency in the federal government that aids in the protection of the environment. Which of the following is not a purpose or function of this agency?a. It adopts regulations to protect the quality of water.b. It aids private citizens to make
Under the Clean Air Act, which of the following statements is(are) correct regarding actions that may be taken against parties who violate emission standards?I. The federal government may require an automobile manufacturer to recall vehicles that violate emission standards.II. A citizens’ group
The Clean Air Act provides for the enforcement of standards for I. The emissions of radioactive particles from private nuclear power plants.II. The emissions of pollution from privately owned automobiles.III. The emissions of air pollution from factories.a. I and II only.b. I and III only.c. II and
Under the federal statutes governing water pollution, which of the following areas is(are) regulated?Dredging of coastal or freshwater wetlands Drinking water standardsa. Yes Yesb. Yes Noc. No Yesd. No No
The National Environmental Policy Act was passed to enhance and preserve the environment. Which of the following is not true?a. The Act applies to all federal agencies.b. The Act requires that an environmental impact statement be provided if any proposed federal legislation may significantly affect
Under the Comprehensive Environmental Response, Compensation and Liability Act as amended by the Superfund Amendments, which of the following is(are) true?I. The present owner of land can be held liable for cleanup of hazardous chemicals placed on the land by a previous owner.II. An employee of a
Which of the following is(are) true under the Federal Insecticide, Fungicide, and Rodenticide Act?I. Herbicides and pesticides must be certified and can be used only for applications that are approved.II. Herbicides and pesticides must be registered under the Act before companies can sell them.III.
Environmental Compliance Audits are used for which of the following purpose(s)?I. To voluntarily discover violations to avoid criminal sanctions.II. To discover violations to avoid civil litigation.III. To meet disclosure requirements to the SEC under the securities laws.a. I only.b. I and II
Which of the following activities is(are) regulated under the Federal Water Pollution Control Act (Clean Water Act)?Discharge of heated water by nuclear power plants Dredging of wetlandsa. Yes Yesb. Yes Noc. No Yesd. No No
Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund, which of the following parties would be liable to the Environmental Protection Agency (EPA) for the expense of cleaning up a hazardous waste disposal site?I. The current owner or
Under the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), which of the following statements is correct?a. Employees are entitled to have an employer established pension plan.b. Employers are prevented from unduly delaying an employee’s participation in a pension plan.c.
Under the Employee Retirement Income Security Act of 1974 (ERISA), which of the following areas of private employer pension plans is(are) regulated?Employee vesting Plan fundinga. Yes Yesb. Yes Noc. No Yesd. No No
Under the Federal Consolidated Budget Reconciliation Act of 1985 (COBRA), when an employee voluntarily resigns from a job, the former employee’s group health insurance coverage that was in effect during the period of employment with the companya. Automatically ceases for the former employee and
Which of the following employee benefits is(are) exempt from the provisions of the National Labor Relations Act?Sick pay Vacation paya. Yes Yesb. Yes Noc. No Yesd. No No
Under the Fair Labor Standards Act, if a covered, nonexempt employee works consecutive weeks of forty-five, forty-two, thirty-eight, and thirty-three hours, how many hours of overtime must be paid to the employee?a. 0b. 7c. 18d. 20
Under the Fair Labor Standards Act, which of the following pay bases may be used to pay covered, nonexempt employees who earn, on average, the minimum hourly wage?Hourly Weekly Monthlya. Yes Yes Yesb. Yes Yes Noc. Yes No Yesd. No Yes Yes
The Family Medical Leave Act provides for I. Unpaid leave for the employee to care for a newborn baby.II. Unpaid leave for the employee to care for the serious health problem of his or her parent.III. Paid leave for the employee to care for a serious health problem of his or her spouse.a. I
Which of the following is not true under the Family and Medical Leave Act?a. An employee has a right to take a leave from work for the birth and care of her child for one month at half of her regular pay.b. An employee has a right to take a leave from work for twelve workweeks to care for his/her
The Americans With Disabilities Act has as a purpose to give remedies for discrimination to individuals with disabilities.Which of the following is(are) true of this Act?I. It protects most individuals with disabilities working for companies but only if the companies do not need to incur any
Under the Americans With Disabilities Act, which is(are) true?I. The Act requires that companies with at least ten employees set up a specified plan to hire people with disabilities.II. The Act requires companies to make reasonable accommodations for disabled persons unless this results in undue
Under the provisions of the Americans With Disabilities Act of 1990, in which of the following areas is a disabled person protected from discrimination?Public transportation Privately operated public accommodationsa. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following company policies would violate the Age Discrimination in Employment Act?a. The company will not hire any accountant below twenty-five years of age.b. The office staff must retire at age sixty-five or younger.c. Both of the above.d. None of the above.
Under the Age Discrimination in Employment Act, which of the following remedies is(are) available to a covered employee?Early Retirement Back paya. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following Acts prohibit(s) an employer from discriminating among employees based on sex?Equal Pay Act Title VII of the Civil Rights Acta. Yes Yesb. Yes Noc. No Yesd. No No
Under which of the following conditions is an on-site inspection of a workplace by an investigator from the Occupational Safety and Health Administration (OSHA) permissible?a. Only if OSHA obtains a search warrant after showing probable cause.b. Only if the inspection is conducted after working
Which of the following claims is(are) generally covered under workers’ compensation statutes?Occupational disease Employment aggravated preexisting diseasea. Yes Yesb. Yes Noc. No Yesd. No No
Workers’ compensation laws provide for all of the following benefits excepta. Burial expenses.b. Full pay during disability.c. The cost of prosthetic devices.d. Monthly payments to surviving dependent children.
Generally, which of the following statements concerning workers’ compensation laws is correct?a. The amount of damages recoverable is based on comparative negligence.b. Employers are strictly liable without regard to whether or not they are at fault.c. Workers’ compensation benefits are not
Workers’ Compensation Acts require an employer toa. Provide coverage for all eligible employees.b. Withhold employee contributions from the wages of eligible employees.846 MODULE 33 REGULATION OF BUSINESS EMPLOYMENT, ENVIRONMENT, AND ANTITRUSTc. Pay an employee the difference between disability
Which of the following provisions is basic to all workers’compensation systems?a. The injured employee must prove the employer’s negligence.b. The employer may invoke the traditional defense of contributory negligence.c. The employer’s liability may be ameliorated by a coemployee’s
Kroll, an employee of Acorn, Inc., was injured in the course of employment while operating a forklift manufactured and sold to Acorn by Trell Corp. The forklift was defectively designed by Trell. Under the state’s mandatory workers’ compensation statute, Kroll will be successful in Obtaining
Which of the following parties generally is ineligible to collect workers’ compensation benefits?a. Minors.b. Truck drivers.c. Union employees.d. Temporary office workers.
Under the Federal Insurance Contributions Act (FICA), which of the following acts will cause an employer to be liable for penalties?Failure to supply taxpayer identification numbers Failure to make timely FICA depositsa. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following types of income is subject to taxation under the provisions of the Federal Insurance Contributions Act (FICA)?a. Interest earned on municipal bonds.b. Capital gains of $3,000.c. Car received as a productivity award.d. Dividends of $2,500.
Which of the following payments are deducted from an employee’s salary?Unemployment compensation insurance Worker’s compensation insurancea. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following forms of income, if in excess of the annual exempt amount, will cause a reduction in a retired person’s social security benefits?a. Annual proceeds from an annuity.b. Director’s fees.c. Pension payments.d. Closely held corporation stock dividends.
Social security benefits may include all of the following excepta. Payments to divorced spouses.b. Payments to disabled children.c. Medicare payments.d. Medicaid payments.
Syl Corp. does not withhold FICA taxes from its employees’compensation. Syl voluntarily pays the entire FICA tax for its share and the amounts that it could have withheld from the employees. The employees’ share of FICA taxes paid by Syl to the IRS isa. Deductible by Syl as additional
After serving as an active director of Lee Corp. for twenty years, Ryan was appointed an honorary director with the obligation to attend directors’ meetings with no voting power. In 2001, Ryan received an honorary director’s fee of$5,000. This fee isa. Reportable by Lee as employee compensation
An unemployed CPA generally would receive unemployment compensation benefits if the CPAa. Was fired as a result of the employer’s business reversals.b. Refused to accept a job as an accountant while receiving extended benefits.c. Was fired for embezzling from a client.d. Left work voluntarily
Taxes payable under the Federal Unemployment Tax Act (FUTA) area. Calculated as a fixed percentage of all compensation paid to an employee.b. Deductible by the employer as a business expense for federal income tax purposes.c. Payable by employers for all employees.d. Withheld from the wages of all
Bolt Corp. dismissed Ace as its general sales agent and notified all of Ace’s known customers by letter. Young Corp., a retail outlet located outside of Ace’s previously assigned sales territory, had never dealt with Ace. Young knew of Ace as a result of various business contacts. After his
Generally, an agency relationship is terminated by operation of law in all of the following situations except thea. Principal’s death.b. Principal’s incapacity.c. Agent’s renunciation of the agency.d. Agent’s failure to acquire a necessary business license.
Thorp was a purchasing agent for Ogden, a sole proprietor, and had the express authority to place purchase orMODULE 32 AGENCY 839 ders with Ogden’s suppliers. Thorp placed an order with Datz, Inc. on Ogden’s behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware
Able, as agent for Baker, an undisclosed principal, contracted with Safe to purchase an antique car. In payment, Able issued his personal check to Safe. Able could not cover the check but expected Baker to give him cash to deposit before the check was presented for payment. Baker did not do so and
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